In a review of the city's 2012 property tax levy, city manager Kelcey Klemm shows where every dollar of the $1.2 million levy went, including funds allocated to the library, the fire department, debt services, economic development and other purposes.

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The largest percentage of funds - 40 percent - went toward the city's debt service, which is mainly made up of bonds used for street improvements, but also includes a golf course equipment lease, Fire Hall lease, and airport runway reconstruction costs. Some of these date back as far as 1999 and will expire in coming years.

The second-largest allocation, of 33 percent of the total tax levy, or nearly $400,000, went to the city's general fund. This fund covers city expenses related to the police department, parks and recreation, administration, public works, ice and snow removal, street lighting and other services.

The remaining 27 percent of the levy went to the Perham Area Library, the fire department, the Economic Development Authority, the Housing and Redevelopment Authority, and toward capital improvements.

What does this mean for the typical Perham property owner?

According to Klemm's report, the owner of a home with a tax value of $120,000 paid about $555 in city taxes in 2012 - about $165 toward debt service, $73 to the police department, $51 to the library (not including a separate library referendum), $41 to the fire department, and smaller amounts to a number of other services and purposes, down to just 18 cents for emergency management.

(See the accompanying chart for an exact breakdown of monthly costs to the average homeowner.)

Other major contributors to the city's budget, not including state aid, are "enterprise funds" - namely the municipal liquor store and the city's gas, water and sewer funds. Combined, these contributed more than $400,000 to Perham's general fund in 2012, and also offset some wages of city employees. Without these enterprise funds, Klemm said, there would be a 35 percent increase in the required tax levy.

Klemm said the 2012 tax levy increase (of less than 2 percent) was the lowest the city had seen in seven years. Because the state changed its property tax formula last year - from a Market Value Credit to a Market Value Exclusion - he worries that there may be a larger increase for 2013.

"This is, to me, my biggest concern (for 2013)," he said in a meeting with the city council last week.

While the 2013 numbers are still being worked out and no figures are certain yet, Klemm explained that the new state formula resulted in a 10 percent reduction in residential tax values, meaning Perham's tax base may have actually decreased - something that hasn't happened for as long as Klemm can remember. If that's the case, property taxes would have to go up more to make up the difference for the city.

"We've always had an increased tax capacity (to justify a small increase in taxes)," Klemm said. "But I'm really worried that this year, we won't."

The purpose of Klemm's report was to give a preview of the city's 2013 budget. City officials will be meeting over the next month to crunch numbers and get a budget finalized.